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Underestimating The Impact Of Inflation On Costs, Especially Healthcare, Over Time

Underestimating the Impact of Inflation on Costs, Especially Healthcare, Over Time

While inflation has been historically low for the past decade, inflation is a top concern for all retirees. Inflation is historically about 3% per year and that means, over the course of a 20-year retirement, everything you buy will more than double. Your daily cup of coffee that costs about $1.00 today may cost around $2.50 before your retirement is over.

Healthcare takes a bigger share of our expenses as we age. First, the inflation rate is higher for healthcare services. Where the general inflation rate is around 3% healthcare has been increasing at over 4%. Second, as we get older, we spend more staying healthy!

Many people think that Medicare or Medicaid will cover their healthcare costs in retirement. While they cover a lot, you should assume you will pay 25% or more of all your health care costs directly. So, you should either have a large pot of money set aside to cover these expenses or look to finance these costs through Medicare Supplement plans and Long-Term Care plans.

Your income must have inflation protection build in. Doing this requires a through discussion of your personal situation with a qualified retirement planner.


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